Reviving Malawi’s Economy Through Targeted Manufacturing and Strategic State Intervention

Malawi continues to grapple with a persistent trade deficit, largely driven by the country’s heavy reliance on imported manufactured goods and low-value primary exports. According to the National Statistical Office (NSO), Malawi imported goods worth MWK 4.2 trillion in 2023, while exporting only MWK 2.3 trillion, resulting in a trade deficit of nearly MWK 1.9 trillion¹.

While the government’s ATM+M strategy — focusing on Agriculture, Tourism, Mining, and Manufacturing — presents a balanced development framework, manufacturing remains underemphasized in both policy prioritization and investment. Recent budget allocations and strategic reviews reflect more focus on agriculture and mining than on industrial capacity development².

A sustainable solution to the trade imbalance lies in import substitution through targeted local manufacturing. By producing goods domestically that Malawi currently imports — such as fertilizer, edible oils, textiles, packaging, and processed food — the country can save foreign exchange, create jobs, and build industrial capacity. However, this cannot be achieved by private sector effort alone.

The Case for State Intervention

In economies like Malawi’s, where the private sector is constrained by limited capital, inadequate infrastructure, and high market risk, direct government intervention becomes essential. This can take the form of:

1. State-Owned Enterprises (SOEs): The government can establish or revive strategic industries — particularly in agro-processing, basic consumer goods, and industrial inputs — to jump-start manufacturing where market forces fail.

2. Public-Private Partnerships (PPPs): Joint ventures can leverage government support (land, tax incentives, infrastructure) and private sector expertise (technology, management, export networks) to establish viable industrial enterprises.

Evidence from countries such as Ethiopia and Vietnam demonstrates how strategic government intervention through SOEs and PPPs can accelerate industrial growth, especially in the early stages of economic transformation³.

Targeted Manufacturing Areas

Strategic focus areas for government-led or supported manufacturing include:

• Fertilizer blending and manufacturing plants, to reduce reliance on imports — Malawi imported fertilizer worth over MWK 200 billion in 2023 alone⁴.

• Cooking oil and food processing, leveraging abundant groundnuts, sunflower, and soybeans.

• Textile production, using Malawi’s cotton — the country exports over 50,000 tonnes of cotton annually with little domestic processing⁵.

• Solar panel assembly and renewable energy products, to support rural electrification efforts under programs like the Malawi Rural Electrification Programme (MAREP).

• Packaging and construction inputs, such as cement, steel, and plastic, much of which is still imported.

Ensuring Effective Execution

To avoid inefficiencies associated with past parastatal failures, any government intervention must be:

• Governed transparently, with clear mandates and performance benchmarks.

• Market-driven, not politically motivated.

• Managed autonomously, with skilled professionals insulated from political interference.

• Time-bound, with clear exit strategies where the state can divest once the market stabilizes if it so requries.

Conclusion

Malawi cannot industrialize through policy pronouncements alone. Manufacturing must move from the margins to the center of national economic strategy. The government must act decisively, not just as a regulator, but as a catalyst for industrial transformation. By investing in and partnering to establish foundational industries, Malawi can reduce its trade deficit, create jobs, and build a more resilient economy.

References

1. National Statistical Office (NSO), Malawi Annual Trade Report 2023, www.nsomalawi.mw ↩

2. Government of Malawi, 2024/2025 National Budget Statement, Ministry of Finance ↩

3. United Nations Conference on Trade and Development (UNCTAD), State-Owned Enterprises and Industrial Development, 2020 ↩

4. Malawi Revenue Authority (MRA), 2023 Import Duty Data ↩

5. Cotton Council of Malawi, Annual Cotton Production and Export Report, 2023 ↩